billion at 16 tables?
New questions have emerged about the accuracy of revenues at Best Sunshine Live, a temporary casino on the island of Saipan that reportedly took in $32 billion (about MOP256 billion) from high-rollers at just 16 VIP tables in 2016. A permanent casino from Imperial Pacific International Holdings is expected to open this month.
According to IPI, every month about 100 VIP visitors contribute an average of $27 million each to its revenue and each of its VIP tables generates a daily average of $5.6 million in bets. The Macau Daily Times and Forbes magazine’s Muhammed Cohen both report that the astronomical figure is about four times more than the pre-slump revenues recorded in Macau, the world’s premier gaming destination.
Now analysts say unpaid player debts may comprise almost 90 percent of VIP revenue, compared to the Asian average of just 14 percent. Moreover, the Times cited “mounting concerns” that if the IR doesn’t open this month as planned, regulators in the Commonwealth of the Northern Mariana Islands may consider revoking the company’s license to operate.
IPI, which is majority-owned by Hong Kong billionaire Cui Lijie, owns the casino through its subsidiary Best Sunshine International. The rumor mill has Best Sunshine CEO Mark Brown moving to become chairman of the company, with current COO Kwong Yiu-ling transitioning to the CEO post. Kwong was affiliated for decades with Macau gaming operator SJM Holdings and also worked as an executive at the Altira Macau and MGM Macau.
According to Forbes’ Cohen, Best Sunshine Live “opened as part of a sweetheart deal” with IPI paying a $15 million annual fee instead of taxes on gaming revenue. In the bargain, it got a 40-year exclusive license and rights to operate “multiple casinos without limits on the number of gaming tables or machines.”
“Saipan has benefited from the ongoing crackdown on political corruption and conspicuous consumption waged by the Chinese central government,” said Global Market Advisors senior partner Andrew Klebanow. “Much of that business has come from VIP play that once went to Macau.”
Now, with doubts about the temporary casino’s VIP take, concerns are mounting that the success story may be built on a fault line.
“With no tax on gross gaming revenue and no apparent independent confirmation, it remains conjecture whether the published VIP numbers have any veracity,” said Newpage Consulting principal David Green, who added that the roll reports “may be confected to ramp up the market value of Imperial Pacific.”
Meanwhile, IPI still needs approximately $300 million to complete its $600 million, 365-room permanent resort. A $400 million bond offering last fall failed, Bloomberg News reported. In February the company issued $70 million in bonds at 8.5 percent to finish the casino and sold another $100 million to Cui at 7.8 percent to continue building the hotel. Fitch and Moody’s have rated the bonds six levels below investment grade, reported Cohen and in January both downgraded Imperial Pacific’s corporate rating.
Adding to the turbulence, an ex-employee has alleged that the temporary casino played fast and loose with U.S. rules against money laundering. A former vice president for table games who filed a wrongful-dismissal lawsuit in December said Imperial Pacific “failed to implement or enforce an adequate” AML program in the U.S.-controlled territory; permitted a $400,000 deposit without the required customer identification; and advised players to structure transactions to avoid the $10,000 reporting threshold.
“Risks are higher for a company doing business in a U.S. territory than any other place in Asia,” said analyst Fredric E. Gushin.
